Crypto assets stand out as one of the significant areas aiming to digitize the financial world. Based on digital, anonymous, and transparent principles, crypto assets have quickly become an alternative digital crime ecosystem for criminals, replacing traditional financial systems. This study addresses how crypto assets are used to commit or conceal crimes and discusses the measures that can be taken to combat these situations.
The Use of Crypto Assets for Criminal Purposes
Money Laundering
Built on a more complex and difficult-to-track infrastructure compared to traditional financial systems, crypto assets have become a frequently preferred tool by criminals in money laundering operations. The decentralized nature of these assets, the possibility of remaining anonymous, and the ability to bypass traditional financial systems lead criminals to choose crypto assets to conceal their identities. The ability to transfer these digital assets internationally and the ease with which these transactions can be conducted make tracking them difficult and complicate criminal activities. Examples of methods used in money laundering activities through crypto assets are listed below.
- Gambling and betting sites, particularly with the spread of the internet and mobile applications, are increasingly playing a significant role in laundering proceeds from criminal activities. The integration of these applications with various crypto platforms, ease of access, and the ineffective design of customer onboarding processes in most of these applications facilitate the legalization of proceeds from crime.
- Alongside the widespread adoption of Web 3.0, many new concepts based on blockchain and crypto technologies have become part of our lives. Among these concepts, NFTs (“Non-Fungible Tokens”) have recently come to the forefront. NFTs are suitable assets for money laundering systems due to their high valuations and the difficulty in tracking buyer and seller information.
- Today, although governments have introduced many regulations for crypto exchanges, various services still exist that allow crypto transactions to be conducted anonymously. Anonymous crypto exchange accounts can enable the circulation of large amounts of money without the need for identity verification. Especially with the use of VPNs ("Virtual Private Networks"), the tracking of already anonymous identities becomes even more challenging.
Cyber Attacks
The use of crypto assets by criminals in ransomware and cyber attacks is rapidly becoming an increasing threat in the digital crime world. Ransomware is malicious software that infiltrates computer systems, encrypts data, and then demands a ransom for its decryption. Cyber attackers use and develop this malicious software to extort money through digital blackmail. In ransomware attacks, perpetrators often demand ransom payments through crypto assets, attempting to obscure their tracks in this manner.
Narcotics and Trafficking
The use of crypto assets in narcotics and trafficking allows criminal organizations and traffickers to bypass traditional financial systems, just as in cases of money laundering and cyber attacks, enabling them to conduct transactions more secretly and untraceably. The ability of crypto assets to be used quickly in cross-border transactions over the internet, combined with the complexity of tracking these assets, has made them an essential tool for payments in illegal activities.
Deep Web Transactions
The deep web is a space where various illegal transactions take place, and as mentioned above, it is commonly used for illegal trade, where crypto assets are frequently utilized. Cryptocurrencies are the preferred payment method for illegal transactions conducted on the dark web. The difficulty of tracking and the high speed of transactions are the primary reasons for this preference, just like in other crimes.
Combating the Use of Crypto Assets for Criminal Purposes
Enhancing Regulatory Controls
Regulatory bodies need to continuously update and strengthen their oversight and security protocols related to cryptocurrencies. Increasing information sharing between regulatory bodies and strengthening international cooperation will also be highly effective in combating crimes involving crypto assets. These measures will boost investor confidence, positively impacting interest in crypto assets and encouraging legal uses.
Analytics Tools and Artificial Intelligence
Rapidly evolving analytics tools and artificial intelligence systems can be utilized to monitor and analyze crypto assets. These systems will help prevent potential crimes by detecting specific patterns and anomalies. Additionally, the use of automated systems for the immediate monitoring and reporting of suspicious transactions is of critical importance.
Know Your Customer (KYC) Processes
Verifying and tracking user identities on crypto asset platforms can enhance platform security by preventing criminals from infiltrating the system. This approach allows for the detection of abnormal activities, enabling quick intervention. Crypto exchanges and other platforms can implement KYC processes to verify users' identities and adhere to AML regulations.
Education and Awareness Campaigns
Raising public awareness about the risks of crypto assets being used in potential crimes through education and awareness campaigns is vital for informing crypto users about security measures and encouraging safe practices.
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